Subpoena Issued for Zell and Chicago Tribune ESOP

Interesting news today, that the Chicago Tribune has received a Subpoena about their leveraged ESOP transaction in 2007.

This is interesting for a number of reasons.  First, depending on the Department of Labor's theory in the case, it could lead to a complete stoppage of these transactions.  Leveraged ESOP buyouts are a unique way to gain special tax treatment for buyers, avoiding unrelated business income tax in the business by forming an S Corporation and using the ESOP to buy the shares.  

However, an ESOP has a fiduciary duty to the plan particpants (employees who own the company). Thus, any activity that leads to destruction of their equity, has the potential to lead to an array of lawsuits.  Interesting here is the DOL's issuance of subpoenas.  This could mean that the DOL is going to pubicly make a statement with their position and potentially file a lawsuit against Sam Zell and the Tribune ESOP.  The basis of the lawsuit would be a violation of ERISA fiduciary duties.  

Second, this could lead to future legislation or court precedent that could again end the use of this sort of transaction in buyouts.  

Third, if the Tribune is successful defending a potential lawsuit, this could increase the use of S Corp ESOP transactions, especially with public companies. 

Wall Street Journal vs. New York Times

Which is the better publication?  If you only had the time to read one paper, which paper would you read if you wanted to digest the greatest amount of financial data, news and analysis?  

Both publications have great websites.  WSJ.com has a neatly organized, and crisp paper feel. Even though it is a website, it seems to feel like you are reading a paper.  Recently, they have been adding more advertisements, which seem to distract from the content on the page.  But, who are we to argue with trying to make money?  Moreover, WSJ.com is moving away from the traditional black and drawing, synonomous with their paper.  Of course, they still frequently use the black and white drawings, but they are now adding more color content.  

The actual paper itself (that's right the stuff you can touch) is a simple reflection of purity.  The paper is great visually and leaves hardly any room for improvement.  The quick summaries on the front page, and the neat columns help the reader with organization and fluidity.  

Recently the Journal added a more significant sports section.   This is a move I see as desperate and largely a reflection of Murdoch's role with the paper.  Sports are great, but they are meant for ESPN.com, local papers and speciality outlets (CNN SI, Sporting News, Rivals, etc).  Not the WSJ.  However, they are providing some insightful reporting that most sporting outlets do not offer, or rarely offer.  However, this is besides the point.  People do not, and will not buy the WSJ for their sports section.  If they want to cut costs, start there.  They need to focus on retaining the brillant reporters that they are consistently aiming to cut, and stop forcing salary cuts.  This is their greatest asset, and they need to protect this asset with due care.  

In the past year or so, the WSJ has also moved away from their traditional bread and butter of being the place for breaking news.  They have succumb to reporting yesterday's news, instead of using their deep bench of sources to provide unique market insight.  It is possible this is being to harsh, but take a look at the front page on a 7 day basis.  At least 3 out of the 7 days contain a frong page story that simply reports what happened in the market that day or the day before.  This is simply not acceptable content for a paper of their prestige.  

The WSJ needs to turn back to reporting that breaks news, instead of summarizes news.  They are still the best in the business at unique content, but under the standards they have self imposed, their unique and insightful content has waned.  

Instead of conitnuing the criticism of the Journal, I should point out the merits of the WSJ.  They provide a great host of opinion related articles, their financial reporting is second to none (Sorry Financial Times).  And they offer quality reporting on a daily basis.  However, the long term criticism seems to be related to the direction the Journal is being forced to walk.  Away from original content and more towards reducing costs by just regurgitating already written content.  

The New York Times on the other hand has strongly improved over the past year or two. Maybe this is a reflection of perception.  It is quite possible that the decline in the WSJ has made the NYT look like better.  Of course, I am referring strictly to their Business related reporting.  

The NY Times website has a feel similiar to their paper product.  Which is great branding.  The NY Times website, is a touch better than the WSJ website, because of the similiarity and the familiar appeal.  

Content wise, the NYT's business page has started to offer the unique content that has dissipated at the Journal (still there but not at the same level).  However, they do not offer the same amount of content, or the depth of the WSJ reports.  I know this is something they are working on, and something they aim to improve.  

Overall, I have a shift in the two papers.  The NYT has become more competitive with the Journal and will keep trying to compete.  Luckily for the WSJ they have their secondary offering, Barrons, to help them stay a step ahead, in marketing and content.  

At the end of the day, if I had to chose one publication, I would stick with the WSJ.  But, it is always good to supplement your reading with a different view and various content.  That is currently the role the NYT plays in my life, and probably the lives of others.  But, keep your eye out for the continued trend towards improvement from the NYT and falloff from the WSJ.